|
|
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO VOIP INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
|
|
|
Principal Amount
$_______________
|
Issue
Date: October
___, 2006
|
|
Purchase Price
$__________________
|
|
SECURED CONVERTIBLE
NOTE
FOR VALUE
RECEIVED, VOIP INC., a Texas corporation (hereinafter called
"Borrower"), hereby promises to pay to ______________________,
_________________________________________ (the "Holder") or order,
without demand, the sum of ________________________________________
Dollars ($_________), on December 31, 2007 (the "Maturity Date"),
if not retired sooner.
This Note has been entered into pursuant to the
terms of a subscription agreement between the Borrower and the
Holder, dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein,
all capitalized terms used in this Note shall have the same meaning
as is set forth in the Subscription Agreement. The following terms
shall apply to this Note:
ARTICLE
I
GENERAL
PROVISIONS
1.1 Payment
Grace Period . The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which
grace period and during the pendency of any other Event of Default
(as defined below) a default interest rate of fifteen percent (15%)
per annum shall apply to the amounts owed hereunder.
1.2
Conversion Privileges . Subject to Section 11 of the
Subscription Agreement, the Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from
the date hereof and until the Note is paid in full regardless of
the occurrence of an Event of Default. The Note shall be payable in
full on the Maturity Date, previously converted into Common Stock
in accordance with Article II hereof; provided, that if an Event of
Default has occurred, the Borrower may extend the Maturity Date up
to an amount of time equal to the pendency of the Event of Default.
Such extension must be on notice in writing.
ARTICLE
II
CONVERSION
RIGHTS
The Holder shall have the right to convert the
principal and any interest due under this Note into Shares of the
Borrower's Common Stock, $.001 par value per share (“Common
Stock”) as set forth below.
2.1.
Conversion into the Borrower's Common Stock .
(a) Subject to
Section 9(f) and 9(s) of the Subscription Agreement, the Holder
shall have the right from and after the date of the issuance of
this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note,
at the election of the Holder (the date of giving of such notice of
conversion being a "Conversion Date") into fully paid and
nonassessable shares of Common Stock as such stock exists on the
date of issuance of this Note, or any shares of capital stock of
Borrower into which such Common Stock shall hereafter be changed or
reclassified, at the conversion price as defined in Section 2.1(b)
hereof (the "Conversion Price"), determined as provided herein.
Upon delivery to the Borrower of a completed Notice of Conversion,
a form of which is annexed hereto, Borrower shall issue and deliver
to the Holder within three (3) business days after the Conversion
Date (such third day being the “Delivery Date”) that
number of shares of Common Stock for the portion of the Note
converted in accordance with the foregoing. At the election of the
Holder, the Borrower will deliver accrued but unpaid interest on
the Note, if any, through the Conversion Date directly to the
Holder on or before the Delivery Date (as defined in the
Subscription Agreement). The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by
dividing that portion of the principal of the Note to be converted
by the Conversion Price.
(b) Subject to
adjustment as provided in Section 2.1(c) hereof, the Conversion
Price per share shall be $0.28, subject to adjustment as described
herein and in the Subscription Agreement.
(c) The
Conversion Price and number and kind of shares or other securities
to be issued upon conversion determined pursuant to Section 2.1(a),
shall be subject to adjustment from time to time upon the happening
of certain events while this conversion right remains outstanding,
as follows:
A. Merger, Sale
of Assets, etc. If the Borrower at any time shall consolidate with
or merge into or sell or convey all or substantially all its assets
to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be
deemed to evidence the right to purchase such number and kind of
shares or other securities and property as would have been issuable
or distributable on account of such consolidation, merger, sale or
conveyance, upon or with respect to the securities subject to the
conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision
shall similarly apply to successive transactions of a similar
nature by any such successor or purchaser. Without limiting the
generality of the foregoing, the anti-dilution provisions of this
Section shall apply to such securities of such successor or
purchaser after any such consolidation, merger, sale or
conveyance.
B.
Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the
same or a different number of securities of any class or classes
that may be issued or outstanding, this Note, as to the unpaid
principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted
number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other
change.
C. Stock
Splits, Combinations and Dividends. If the shares of Common Stock
are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common
Stock in shares of Common Stock, the Conversion Price shall be
proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of
shares, in each such case by the ratio which the total number of
shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding
immediately prior to such event.
D. Share
Issuance. So long as this Note is outstanding, if the Borrower
shall issue or agree to issue any shares of Common Stock except for
the Excepted Issuances (as defined in the Subscription Agreement)
for a consideration less than the Conversion Price in effect at the
time of such issue, then, and thereafter successively upon each
such issue, the Conversion Price shall be reduced to such other
lower issue price. For purposes of this adjustment, the issuance of
any security carrying the right to convert such security into
shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in an adjustment to the
Conversion Price upon the issuance of the above-described security
and again upon the issuance of shares of Common Stock upon exercise
of such conversion or purchase rights if such issuance is at a
price lower than the then applicable Conversion Price. The
reduction of the Conversion Price described in this paragraph is in
addition to other rights of the Holder described in this Note and
the Subscription Agreement.
(d) Whenever the
Conversion Price is adjusted pursuant to Section 2.1(c) above, the
Borrower shall promptly mail to the Holder a notice setting forth
the Conversion Price after such adjustment and setting forth a
statement of the facts requiring such adjustment.
(e) During the
period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares
to provide for the issuance of Common Stock issuable upon the full
conversion of this Note and as described in the Subscription
Agreement. Borrower represents that upon issuance, such shares will
be duly and validly issued, fully paid and non-assessable. Borrower
agrees that its issuance of this Note shall constitute full
authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
2.2. Optional
Redemption of Principal Amount . Provided an Event of Default
or an event which with the passage of time or the giving of notice
could become an Event of Default has not occurred, whether or not
such Event of Default has been cured, the Borrower will have the
option of prepaying the outstanding Principal amount of this Note
("Optional Redemption"), in whole or in part, by paying to the
Holder a sum of money equal to the number of Shares of Common Stock
issuable upon an assumed conversion of the outstanding principal
and interest of this Note multiplied by $1.50, and any and all
other sums due, accrued or payable to the Holder arising under this
Note or any Transaction Document through and as of the Redemption
Payment Date as defined below (the "Redemption Amount").
Borrower’s election to exercise its right to prepay must be
by notice in writing (“Notice of Redemption”). The
Notice of Redemption shall specify the date for such Optional
Redemption (the "Redemption Payment Date"), which date shall be
thirty (30) business days after the date of the Notice of
Redemption (the "Redemption Period"). A Notice of Redemption shall
not be effective with respect to any portion of the Principal
Amount for which the Holder has a pending election to convert, or
for conversions initiated or made by the Holder during the
Redemption Period. On the Redemption Payment Date, the Redemption
Amount, less any portion of the
